Do shareholders punish or reward excessive CSR engagement? Moderating effect of cash flow and firm growth

Although extensive past research has studied the connection between corporate social responsibility (CSR) and firm value, it has rarely discriminated between optimal and excessive CSR. Thus, we addressed this issue by examining whether shareholders punish or reward excessive CSR engagement through the moderating effect of cash flow and firm growth. We applied country–industry–year fixed-effects (FE) regression to a cross-country sample of 43,803 firm-year observations between 2002 and 2019. The findings show that while both optimal and excessive CSR increase firm value, optimal CSR has greater value relevance than excessive CSR for shareholders. However, although cash flow positively moderates the relationship between optimal and excessive CSR and firm value, firm growth negatively moderates this relationship. The findings are robust regarding alternative CSR proxies, industry-adjusted firm value measures, public governance indicators, and endogeneity concerns.